Why Do Millions of U.S. Homebuyers Use Risky Financing Options?

Homes come in all shapes and sizes—and so do the loans needed to buy them. For many prospective buyers, obtaining a traditional, safe 15- or 30-year mortgage is a key step to achieving financial security and their dream of homeownership. But for borrowers looking to buy a home valued under $150,000, financing can be hard to come by, and the available options are often risky—even for those with good credit.

This video from The Pew Charitable Trusts shows how the scarcity of small mortgages can lead millions of borrowers to seek non-mortgage loans or other risky alternative financing arrangements. Many common alternative options—such as seller financing and rent-to-own—can land buyers in serious legal binds or bury them in debt, often costing thousands of dollars in fees and interest and causing borrowers to pay far more than their homes are worth. Some buyers even sink their life savings into a home they never actually own.